In this thesis, the propulsion losses, which are caused by added drag due to steering of the ship, can be minimized by using an Adaptive Automatic Optimal Controller. It is shown in this thesis that an Adaptive Automatic Optimal Controller is capable of providing fuel savings in excess of 0.5% over a well tuned PID controller when operating at the design speed at random headings in sea states. A new approach was used in finding fuel savings without using the engine specifications. It is shown that the second-order forces and moments create drift motions along the surge, sway, and yaw axes. As a consequence of this, the second-order forces and moments cause more fuel consumption than the first-order forces and moments cause more fuel consumption than the first-order forces and moments, which create only oscillatory ship motions along this axis. So the sea state in the deterministic model is represented by the first-order and second-order forces and moments. Keywords: Cost Function; Function Minimization Subroutine BOXPLX.